Saudi Arabian stocks dip ahead of Aramco IPO

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Saudi Arabia’s main index opened higher before turning red on Tuesday, a day before Saudi Aramco is expected to list its shares on the country’s stock exchange.

Saudi Aramco will list 1.5 percent of its shares on the Saudi Stock Exchange (Tadawul) on Wednesday. The oil giant, which raised $25.6 billion in its main initial public offering (IPO), will trade under the symbol 2222.

Vrajesh Bhandar, senior portfolio manager at Al Mal Capital, expects Aramco’s shares to hit the upper limit of 10 percent on Wednesday.

“There has been a good amount of interest in the IPO wherein several accounts have not got any allocation and they would want to take immediate exposure to this mega cap stock,” he said.

On Monday, the Kingdom announced its 2020 budget, which will see an expenditure of $272 billion, compared to $280 billion in 2019, and a revenue of $222 billion, in line with pre-budget figures.

The 2020 budget will include a deficit of nearly $50 billion.

Among top gainers on the Tadawul: Al Hassan Ghazi Ibrahim Shaker Co up 5.3 percent, Al Kathiri Holding 4 percent, Saudi Steel Pipe Co 3 percent.

Among top losers: Arabian Cement Co down 2.5 percent, Yanbu Cement Co 2.4 percent, Saudi British Bank 2 percent.

The unprecedented size of the Aramco IPO risks sucking the liquidity on the Tadawul, but will attract more capital to the Gulf’s largest market in the medium-term.

The inclusion would lead to the TASI – the main index - outperforming other developing countries in terms of profitability and shareholder returns, Aljazira Capital analysts wrote in a research note.

Oil prices could become a key driver of stocks, as it contributes “significantly” to Saudi Aramco’s overall financial performance, the analysts said.

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